BB set to issue digital bank licences soon

The Bangladesh Bank will begin issuing digital bank licences soon in a bid to accelerate financial inclusion, and the regulator has already finalised guidelines for virtual bank operations.

Digital bank, also known as Neobank or virtual bank, offers all its services online, doing away with all the paperwork such as cheques, pay-in slips, and demand drafts. Such banks behave like any other scheduled commercial bank, and can offer loans and accept deposits.

Central bank sources say the digital bank regulatory guidelines formulation committee, headed by central bank Deputy Governor Abu Farah Md Nasser, set to place the guidelines on its 428th board of directors meeting on June 14.

Speaking to The Business Post seeking anonymity, a member of the committee and also a senior official of the Bangladesh Bank, said, “The guidelines are likely to be approved in that board meeting.

“The regulatory guidelines have been formulated under the Bank Company Act, and digital banks will have to comply with both the guidelines and the act.”

He added that a digital bank will have to secure at least Tk 125 core as paid up capital, and the directors and management officials will have to be appointed as per the Bank Company Act.

The other capital related requirements for virtual banks will also be the same as conventional banks, as per the draft of the regulatory guidelines.

This committee member pointed out, “There a digital bank would offer no branch-based services, but there will be headquarters. Such banks will offer all related services, including lending and deposit mobilisation, online.

“Individuals and companies will be able to apply to the central bank for digital bank licences.”

Bangladesh Bank Deputy Governor Abu Farah Md Nasser said, “Digital banks would reduce operational costs of banks. Such banks are very much needed to reduce cash transactions and build a cashless society.

“Clients of virtual banks would be able to transact by using QR codes instead of physically visiting bank branches. Almost all banks in the country adopted digital financial services amid the Covid-19 pandemic, alongside traditional banking services.”

Around two years ago, Bank Asia had applied to the central bank for a digital bank license, but got denied as there were no guidelines available at that time to run such banks.

Responding to a query, Bank Asia’s former managing director Arfan Ali said, “It is very good news that the central bank has finalised the regulatory guidelines for digital banks.

“Clients, especially the new generation, want to avoid visiting bank branches physically and this tendency has increased due to the pandemic. However, the paid up capital of a digital bank should be increased from Tk 125 crore because the amount is too small.”

Nagad, a digital payment service provider, also wants to get a digital bank license from the central bank. The company has yet to get a mobile financial service license from the banking regulator, but they have already secured a NBFI license.

In June last year, Finance Minister AHM Mustafa Kamal in his FY23 budget speech had said that the government was establishing digital banks in the country.

He had mentioned that establishing such banks is either at the initial implementation or experimental stage in various developed countries, as well as some developing ones in Asia, including Singapore, Malaysia, and India.

Huge employment opportunities will be generated for young IT workers once digital banks are established, Kamal had said. The finance minister had also repeated in his budget speech for FY24 about the formulation of digital banks.